U.S. lawmakers seek to permanently halt settlement 'slush funds'

WASHINGTON, Oct 24 (Reuters) - Republicans in the U.S. House of Representatives on Tuesday passed legislation to end government settlements with companies that require payouts to outside organizations, a practice they decry as a “slush fund” for left-wing interest groups.

In a vote of 238 to 183 the House voted to end a process the chamber's top Republican, Speaker Paul Ryan, has dubbed "sue and settle," where the government settles lawsuits in part by requiring corporations to pay millions of dollars to third-party groups and community organizations.

The administration of President Donald Trump, a fellow Republican, this summer suspended the practice. Republican lawmakers want it wiped out entirely, arguing funds go to activist groups that support Democrats.

Donations to outside groups were often included in settlements reached by the administration of former President Barack Obama, a Democrat, to help fix problems corporations allegedly caused for the environment, public health, workers or consumer finances.

For example, Volkswagen AG must invest $2 billion in electric-vehicle research and development as part of its settlement with the government over its diesel emissions scandal.

The House bill would only allow settlement funds to go to the U.S. government or individual victims. The Justice Department could not require money be paid to third parties.

Republicans also say the donation requirements give regulators too much power, and allow them to bypass the congressional budget process.

No Democrats voted for the bill, which they said would end payments that are often the only way to address discrimination based on race or religion and other wrongdoing that has broadly affected groups of people.

“There’s a big problem in America when federal agencies hand out money to left-wing special interest groups and political donors in illegitimate settlement cases," said the second-most powerful Republican in the House, Kevin McCarthy.

Representative John Conyers, a Michigan Democrat, said the legislation would have blocked requirements for Bank of America and Citigroup Inc to contribute to housing finance programs as part of their settlements over bad mortgages that contributed to the 2007-09 financial crisis and recession.

"The Justice Department did not use any of these settlement agreements to fund 'activist groups,'" he said. (Reporting by Lisa Lambert; Editing by Andrew Hay)